16/04/2025 - 07:02 UTCThe U.S. Dollar Index (USDX) posted minor gains on Tuesday, rising by 0.46% according to iFOREX platform data. This uptick occurred despite persistent worries surrounding the escalating US-China trade war and lingering US recession fears amidst the ongoing unpredictable US tariff implementations by President Donald Trump. These concerns had contributed to the dollar trading near its lowest level since April 2022, touched last week. Nonetheless, rising market bets that the Federal Reserve (Fed) will soon resume its rate-cutting cycle, with expectations of as many as four rate cuts this year, somewhat limited the gains for the greenback.
Adding a significant element to the global economic landscape, China's economy demonstrated robust growth in the first quarter of 2025. Official data published by the National Bureau of Statistics (NBS) on Wednesday revealed an annual expansion rate of 5.4%, matching the pace recorded in the final quarter of the previous year. This figure notably surpassed the market forecast of 5.1% for the reported period. On a quarterly basis, China's Gross Domestic Product (GDP) rate saw a rise of 1.2% in Q1 2025, following a 1.6% advance in the preceding quarter. Further positive indicators from China included a significant jump in annual March Retail Sales, which surged by 5.9%, exceeding both the expected 4.2% and the previous 4% figure.
A larger-than-anticipated slowdown in U.K. inflation for March has increased the potential for the Bank of England to implement another interest rate cut as early as next month. Annual consumer price inflation eased to 2.6%, below February's 2.8% and the expected 2.7%, though still above the central bank's 2.0% target. The monthly CPI increase also undershot forecasts, rising by 0.3% compared to the anticipated 0.4%. This cooling price pressure, particularly evident in the drop of core inflation to 3.4% annually, strengthens the case for a 25 basis point rate cut to 4.25% at the Bank of England's May 8th meeting. Despite increasing expectations for the Bank of England to ease monetary policy, both the Pound Sterling (GBP) and the UK 100 index have shown upward momentum in recent trading sessions.
Trump's announcement of potential tariffs on pharmaceuticals and semiconductors triggered a sell-off in healthcare stocks, with Moderna Inc. among the day's biggest losers. Meanwhile, the first-quarter earnings season gained momentum, revealing resilience in corporate profits despite economic headwinds. Bank of America saw its stock surge 3.67% on strong net interest income and record equities trading revenue, fueled by tariff-related market volatility. Citigroup also reported better-than-expected results, with its stock rising 1.84%, similarly benefiting from increased trading activity. Johnson & Johnson, despite exceeding first-quarter estimates, saw a slight stock decline of 0.43% after revising its full-year earnings outlook. In the tech sector, Netflix shares jumped 4.8% following reports of the company's ambitious growth targets. Investors are now closely watching upcoming Federal Reserve speeches, particularly from Chair Jerome Powell, for insights into interest rate policy amidst rising uncertainty over tariffs and recession risks.
For Wednesday, events that could draw market focus, include U.S. Core Retail Sales data, providing insights into consumer spending; the Bank of Canada's Monetary Policy Report and subsequent interest rate announcement, which will signal the central bank's near-term policy stance and a closely watched speech on the economic outlook by Federal Reserve Chairman Jerome Powell at the Economic Club of Chicago. Furthermore, the upcoming week will also witness the release of quarterly earnings reports from several significant market participants, including streaming giant Netflix, healthcare provider Unitedhealth, and cosmetics powerhouse L’Oreal.
The EUR/USD pair edged lower on Tuesday, as the US Dollar (USD) staged a modest recovery. Despite this short-term bounce, the broader outlook for the USD remains under pressure, as its traditional safe-haven appeal continues to diminish amid a flurry of unpredictable tariff-related headlines from US President Donald Trump.
Market participants are closely watching for the upcoming US Retail Sales report and a scheduled speech by Federal Reserve (Fed) Chair Jerome Powell later today.
On Monday, Federal Reserve Governor Christopher Waller remarked that the Trump administration’s tariff strategy has been a significant shock to the US economy. He indicated that the Fed might consider cutting interest rates to stave off a potential recession—even in the face of elevated inflation. Meanwhile, Atlanta Fed President Raphael Bostic expressed a more cautious stance, suggesting the central bank should maintain its current policy until more economic clarity emerges.
In Europe, attention turns to the European Central Bank (ECB), which is widely expected to lower interest rates by 25 basis points on Thursday in response to growing concerns over recession risks, partly fueled by ongoing US trade policies.
Gold prices ended Tuesday’s session with strong gains as investors sought refuge in the precious metal amid growing unease surrounding US President Donald Trump’s evolving tariff strategy.
The sharp uptick in gold came driven by a continued decline in US Treasury yields for the second consecutive day. Market sentiment soured further on reports suggesting the Trump administration may soon target pharmaceuticals with new tariffs—an unexpected move that added to fears of broader economic disruption.
In another sign of escalating trade tensions, China instructed its domestic airlines to suspend deliveries of Boeing aircraft, a decision that weighed further on risk appetite and contributed to the rush into safe-haven assets like gold.
Looking ahead, gold traders are closely watching a string of key US data releases, including March Retail Sales, as well as commentary from several Federal Reserve officials—most notably Fed Chair Jerome Powell, scheduled to speak on Wednesday.
Oil prices remained relatively unchanged on Tuesday as investors processed the latest developments in U.S. President Donald Trump’s shifting tariff policies and weighed the potential impact of the U.S.-China trade war on global economic growth and energy demand.
The inconsistent trajectory of U.S. trade policy has fueled volatility in global oil markets, prompting the Organization of the Petroleum Exporting Countries (OPEC) to revise down its demand forecast on Monday. The International Energy Agency (IEA) echoed this sentiment on Tuesday, projecting the slowest oil demand growth in five years through 2025, citing trade-related concerns as a key factor.
So far this month, oil prices have dropped more than 14%, weighed down by trade policy concerns and a planned supply increase from the OPEC+ alliance, which includes Russia and other major producers.
Market participants now turn their attention to the latest U.S. oil inventory reports. The American Petroleum Institute is set to release data later Tuesday, followed by the EIA’s official figures on Wednesday.
U.S. equities closed lower on Tuesday as early gains faded, with the US 500 dragged down by losses in health care and consumer sectors. Persistent uncertainty over U.S. President Donald Trump’s evolving tariff policy continued to weigh on investor sentiment.
Health care stocks led the declines after the Trump administration announced it would begin investigating imports of pharmaceuticals and semiconductor products—moves seen as potential precursors to new tariffs.
On a more positive note, bank stocks advanced following upbeat first-quarter earnings reports. Bank of America jumped over 3% after reporting a solid rise in net interest income. The bank also benefited from record trading revenue in its global markets division, driven by tariff-fueled market volatility.
Citigroup gained more than 1% after also posting stronger-than-expected results, following the trend of Wall Street lenders capitalizing on recent market swings.
Investors are now closely monitoring commentary from several Federal Reserve officials slated to speak this week, including a key address by Fed Chair Jerome Powell on Wednesday. Market participants are focused on the central bank’s next moves regarding interest rates amid rising concerns about tariffs and the potential for a U.S. recession.
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